Wolfowitz Criticizes Handling Of Probe
World Bank Chief Accuses Panel of Leaks, Unfair Haste

By Peter S. Goodman
Washington Post Staff Writer
Wednesday, May 9, 2007

World Bank President Paul D. Wolfowitz yesterday disparaged a bank panel probing his handling of a pay raise for his girlfriend, accusing investigators of poisoning the atmosphere with leaks while depriving him of sufficient time to respond to accusations that he broke ethics rules.

"The inability of the committee to control leaks about its draft conclusions is very harmful, not just to Mr. Wolfowitz personally but to the institution," lawyer Robert S. Bennett said in a written statement on Wolfowitz's behalf. "The appearance that people are prejudging the outcome of the process weakens bank governance and disrespects both the board and the process."

The committee gave Wolfowitz a copy of its report accompanied by transcripts and other documents exceeding 600 pages late Sunday, telling him he had until the end of yesterday to submit a written response, Bennett said. The report and the response are to go to the bank's executive board, which could deliberate as soon as tomorrow on whether to discipline Wolfowitz, call for his resignation or fire him, senior bank officials said.

Bennett initially complained that the response time was too brief, gaining a one-day extension through the end of today, he said. But he and Wolfowitz said that was still not enough time.

"This is terribly unfair," the statement said, citing World Bank rules that give staff members at least five business days to respond to internal investigations. "We are extremely disheartened."

Consensus appeared to be growing yesterday that Wolfowitz can no longer effectively lead the institution and its global anti-poverty mission, as European finance ministers meeting in Brussels called for an end to the leadership crisis.

"We need a president with a good reputation and good integrity," Dutch finance minister Wouter Bos said, according to the Associated Press. He said he has "serious doubts" about Wolfowitz.

"It is impossible to go around the world speaking about good governance without good governance at the World Bank," said Belgium's finance minister, Didier Reynders.

In much of Europe, Wolfowitz is reviled as a primary architect of the Iraq war and as a symbol of a U.S. administration seen as arrogant and aloof -- sentiments that have deepened as the ethics controversy has emerged. The European parliament has called for Wolfowitz to resign.

But some analysts doubt the willingness of the bank's board to vote out Wolfowitz, an action that would break with the institution's consensus-minded culture while risking fresh conflict with the Bush administration.

Under an arrangement in place since the bank's inception in 1944, the United States has the right to name the World Bank president, and Europe names the leader of the bank's sister institution, the International Monetary Fund. A senior administration official has said that if Wolfowitz is forced out at the bank, Europe could lose its rights to name the leader at the fund.

Many analysts assume European governments will seek to safeguard their hold on the IMF by forging a negotiated compromise to the crisis that would give Wolfowitz a face-saving way out without the indignity of being fired.

"If Wolfowitz has to go, the Americans are not going to be too pleased," said Michael Mussa, a former economic counselor at the International Monetary Fund and now a senior fellow at the Peterson Institute for International Economics. "The key European leaders don't want to have another controversy with the United States. This thing for them is just an enormous inconvenience. They want Wolfowitz to jump without visibly being pushed."

Some argue that the convention of reserving the leadership posts at the World Bank and the IMF for the United States and Europe is outdated, asserting that now is an ideal time to scrap it in favor of a selection based on merit.

"What is at stake here is not merely Wolfowitz's position, but the whole system by which all of these positions are chosen," said Kenneth Rogoff, a former IMF official and fellow at the Brookings Institution. "It's an incredible anachronism, and it's time for it to go. If it persists, it makes the World Bank an embarrassment."

There has been speculation in recent days that European leaders may pursue a deal under which the Bush administration would allow Wolfowitz to be forced out in exchange for the promise that the United States would still be allowed to name his replacement.

That idea has some support in smaller European nations, but a senior World Bank official, who discussed confidential board deliberations on condition of anonymity, said the formulation did not have the backing of most European board members. A senior administration official said the United States would not entertain such a proposal because it already has the right to name the World Bank president.

"Our conversations aren't about making deals," said White House spokesman Tony Fratto. "They're about ensuring that the review is fair. We believe Wolfowitz should remain at the World Bank."

The investigating committee has accused Wolfowitz of violating his contract and undermining the bank's credibility in engineering a job transfer and substantial pay raise for his longtime companion, Shaha Riza, shortly after arriving at the bank in 2005.

Wolfowitz has maintained that he did nothing wrong, acting with the guidance of the bank's ethics committee in arranging Riza's transfer to avoid a conflict of interest. The raise was compensation for her inconvenience, he said. The bank's general counsel and the chairman of the ethics committee told investigators that they were never informed about the extent of the raise.